Proposed Shell tax break in Pa. worth $66M a year

Jun. 5, 2012

Written by

Peter Jackson

The Associated Press

HARRISBURG, Pa. -- Gov. Tom Corbett, who has been criticized for cutting state spending for schools and social services, is advocating future tax credits worth as much as $66 million a year for a petrochemical refinery planned by Shell Oil Co. in western Pennsylvania to capitalize on booming natural-gas drilling in the Marcellus Shale region.

The Corbett administration is seeking legislative approval now to demonstrate its willingness to share the costs of the multibillion-dollar project, even though the credits would not become available until 2017. The credit would be worth nearly $1.7 billion over the 25 years they would remain in place.

"It's a competitive climate out there," said Steve Kratz, a spokesman for the Department of Community and Economic Development. "This is about reindustrializing the state."

Corbett has not publicly discussed the proposed tax break. But Kratz on Monday confirmed information first reported by the online news service Capitolwire and provided new details.

A top aide to Senate President Pro Tempore Joe Scarnati said lawmakers will demand assurances that the plant will be built in Pennsylvania and that promises of 10,000 to 20,000 related jobs will materialize. The bill is expected to be introduced in the Senate this week, the aide said.

"The Corbett administration needs to sell this and, if they can make a compelling case that the amount of jobs proposed is accurate, I think some people (in the Senate) are going to be sympathetic to the credit," said Drew Crompton, who is chief of staff for Scarnati, R-Jefferson.

Shell already stands to receive 15 years of tax cuts and exemptions under a bill Corbett signed earlier this year to designate the cracker-plant site as an expanded Keystone Opportunity Zone.

Kratz said the amount of tax credits available to Shell will be calculated annually based on its Pennsylvania tax liability. It could sell all or the unused portion of the credit to suppliers of natural gas containing ethane or manufacturers of products that use ethane or ethane derivatives, he said.

The proposed credit is designed to "keep ethane in Pennsylvania to be used in manufacturing and other industries that use ethane and its byproducts," Kratz said.

The environmentalist group PennFuture criticized the plan, contrasting it with recent cuts in education spending.

"The governor is choosing winners and losers and he has cast his lot with choosing to further help a multi-billion dollar corporation over the education of future generations of Pennsylvanians," George Jugovic Jr., the group's president, said in a statement.

Pennsylvania competed with Ohio and West Virginia for the planned ethane-cracking plant and all three states included tax breaks in their proposals.

In March, Shell announced that it had picked a site near Monaca, about 35 miles northwest of Pittsburgh, and signed a land-option agreement so it can further evaluate the site.

The "cracker" facility would convert ethane from natural gas produced in the Marcellus Shale region into more profitable chemicals such as ethylene, which is used in making products that include plastics, tires and footwear. Shell has said it could spend billions of dollars on the project, which is expected to draw other companies to the area, although actual construction is still years away.

Shell, a subsidiary of Netherlands-based oil and gas giant Royal Dutch Shell PLC, did not return a call about the tax credit plan Monday.

Corbett, a Republican elected on a no-new-taxes pledge, has blamed sluggish state revenues and the rising cost of pensions and health care for the poor for an array of spending cuts in his $27.1 billion budget plan that also would reduce business taxes for the year that starts July 1.

Last month, citing better-than-expected tax collections, senators approved a $27.7 billion alternative plan that would increase the subsidies Corbett proposed for universities, public schools, county-run social services, the race horse industry, medical research, retailers that collect sales taxes and hospitals and nursing homes that care for the poor.